FAQ - 13 March 2014

Q: My client has a subsidiary company with a fishing vessel. They rent fishing
permits from fishing rights holders. SARS has audited the company in June 2013
and rejected the diesel rebate because the act states that you can only claim a
diesel rebate if your fishing permit is issued in the name of the permit
holder.

A: "Eligible purchases are only applicable in respect of fishing
vessels -

(A) which are owned or chartered by a legal
person registered in the Republic in accordance with the laws of the Republic
and which has its place of effective management in the Republic, or by a natural person who is ordinarily resident in the
Republic;

(B) which are registered or licensed in terms of the Merchant Shipping Act,
1951 (Act No. 57 of 1951);

(C) that are nominated on a valid commercial fishing permit issued by
the Department of Agriculture, Forestry and Fisheries in terms of the Marine
Living Resources Act. 1998 (Act No. 18 of 1998);

(D) which are used in fishing activities carried on with the aim of making a
profit; and

(E) if used in an engine for the propulsion of, or operating of any equipment
used on board, of such fishing vessels"

It is my understanding that SARS is
correct in their application. You may however consider par (C) and investigate
as to what a nomination for such a permit may entail for purposes of the
Department of Agriculture, Forestry and Fisheries.

2. Tax return submitted to SARS with an incorrect value

Q: We have had continuous problems with SARS trying to sort a
matter out for a client's tax return for 2011 year of assessment. The client attempted to complete his own return, when
completing the PAYE he made a mistake and put in 1698 in place of 16986. He only became aware of the problem when SARS started
calling him about his outstanding account. He then approached our firm in
May 2013 for assistance. We have filed several objections and asked SARS to fix
the error to with no avail.

A: You
may request that the assessment be reduced in terms of s93 of the Tax
Administration Act as it seems that the error relates to an "undisputed error”.
The prescription rules in terms of s 104 does not apply (as you are not
objecting to the assessment) and SARS may make a reduced assessment within 3
years after the date of the original or subsequent assessment.

93. Reduced assessments.—

(1)
SARS may make a reduced assessment if—

(a) the taxpayer successfully
disputed the assessment under Chapter 9;

(b) necessary to give effect to
a settlement under section 149;

(c) necessary to give effect to
a judgment pursuant to an appeal under Part E of Chapter9 and there is no right of
further appeal; or

(d) SARS is satisfied that
there is an error in the assessment as a result of an undisputed error by—

(i) SARS; or

(ii) the taxpayer in a return.

(2) SARS may reduce an
assessment despite the fact that no objection has been lodged or appeal noted.

3. Donations tax exemption

Q: If an individual made
donations during a specific tax year for example to his family trust to the
amount of R100 000 and donations to amount of R20 000 to an approved PBO (Sec
18A), is the R20 000 still deductible in his personal capacity to (limited to
10% of taxable income before medical aid) or is he just limited to the R100 000
exemption?

Further, does
the R100 000 exemption on donations for individuals (Sec56(2)(b)) include any
donations made to a Sec18A Institution

A: Donations
to PBO’s are exempt from donations tax in terms of s 56(1)(h): "by or to
any person (including any sphere of government) referred to in section 10 (1) (a), (cA), (cE), (cN), (cO), (d) or (e).

S 18A
receipts may be issued to Public Benefit Organisations (ss 10(1)(cN) and
10(1)(cA) institutions).

WHY REGISTER WITH SAIT?

Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.